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Topics addressed on December 24, 2008:
Opening retail account can save money during the holiday season
While doing Christmas shopping, is it possible to save considerably if I accept a merchant’s credit card? Does this influence my credit score even if used infrequently?
During the holidays, retailers often offer discounts for opening a credit account with them because it attracts customers and tends to build brand loyalty to keep you coming back.
You may have noticed a new trend in that the credit card is quite likely to be a general use credit card that is co-branded with the store’s name on it. The benefit to you is that it can be used at any store that accepts major credit cards.
If you are making a large purchase, you could save a lot of money that day.
But be careful. If you fail to pay the entire balance by the end of the billing cycle, you may have to pay more in interest than the discount you received by getting the new account.
Any time you open another account you must be cautious about adding debt that you can’t pay in full that month, and you must always keep in mind how much you owe compared to your credit limits. The positive is that a new account can help credit scores by lowering your overall utilization rate.
Just don’t get carried away applying for retail accounts if you are going to apply for a car loan or mortgage loan where the interest rate is very sensitive to risk. Applying for too many accounts in a short time can temporarily hurt your credit scores.
Instead of applying every time you are given the chance, research where you will save the most by doing so and limit your applications to those stores. It can be an excellent way to use credit to your advantage. But, like any other credit card, you must use it wisely.
Thanks for asking.
- The "Ask Experian" team